While Bitcoin (BTC) spot ETFs introduced by BlackRock and other firms have recently gained significant attention in the cryptocurrency world, an older Bitcoin investment vehicle has experienced impressive growth over the past few months as well.
Since the beginning of this year, the 2X Bitcoin Strategy ETF (BITX) has increased its holdings of Bitcoin futures contracts fourfold, making it one of the biggest such exchange-traded funds in the US.
Institutions Increase Bitcoin Leverage
Based on Volatility Shares’ information, BITX had net assets valued at approximately $1.58 billion as of Tuesday. In contrast, BITO, ProShares Bitcoin Strategy ETF – the first US Bitcoin futures ETF – reported holding $2.82 billion in assets on the same day. As a result, BITX emerges as one of the notable competitors in the Bitcoin futures ETF sector.
In a recent post on X, published on a Wednesday, Bloomberg ETF analyst Eric Balchunas expressed surprise, stating that the size of BITX is much greater than many people would have anticipated.
“Institutions are increasing their Bitcoin investments using borrowed funds, according to Nic Puckrin, CEO and co-founder of CoinBureau. This demonstrates that even large institutions can behave impulsively in the crypto market,” is one possible paraphrase for the original quote.
An ETF that follows theBitcoin futures market, like BITO, is designed to give investors returns similar to Bitcoin itself. It achieves this by purchasing and holding Bitcoin futures contracts.
BITX works differently than other investments: its goal is to deliver daily gains equal to twice the daily performance of CME Bitcoin futures. This means higher risks and volatility for investors, making it a more enticing prospect for those who are particularly bullish on Bitcoin.
Starting in June 2023, BITX has met expectations: initial buyers saw a 235% return on their investment, whereas investing in Bitcoin would have given them a 117% gain. In specific periods, BITX outperformed Bitcoin with a return greater than twice as much.
Risks Of A Leveraged ETF
Based on data from K33 Research, our fund has seen larger investments since March than all but a few Bitcoin spot ETFs, such as the ARK 21Shares Bitcoin ETF (ARKB) and the Bitwise Bitcoin ETF (BITB).
“According to Puckrin’s observation, the inflows into the largest Bitcoin spot ETFs managed by BlackRock (IBIT) and Fidelity (FBTC) are still smaller in comparison. However, the growth rate of these funds is faster.”
In the prospectus, BITX cautions investors that while the potential yields look attractive, they may not always match or even double the performance of Bitcoin over an extended period. Fluctuations are inevitable.
If the Index’s growth stalls for more than a day, the Fund may incur losses. It’s even plausible that the Fund could experience losses when the Index rises.
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2024-04-10 20:46